Summers Value Partners Q4 2025 Partner Letter

Dear Fellow Partners:

The Summers Value Fund LP (“the Fund”) returned 6.7% net ¹ in 2025, trailing the Russell 2000 Index ETF (IWM), which returned 12.7%, and the Russell 2000 Value Index ETF (IWN), which returned 12.4%. While our performance in 2025 fell short of expectations, the Fund’s long-term performance remains strong. Since inception, the Fund has delivered a 12.0% annualized net ¹ return compared to 6.9% for IWM and 6.3% for IWN.

Fund Commentary

In the first half of the year, the Fund generated a return of -12.8% net ¹ . The healthcare sector faced significant pressure following the inauguration of the new administration in January. Sentiment weakened the following month with the nomination of a controversial Secretary of Health and Human Services. Tariff proposals targeting key trading partners added to broader economic uncertainty. Simultaneously, leadership changes and layoffs at the FDA created instability within one of the healthcare sector’s most important regulatory agencies. Investor concerns were further heightened by a government proposal aimed at curtailing drug prices in the United States. In addition, funding for early-stage biotechnology companies tightened sharply, forcing many companies to file for bankruptcy. Collectively, these factors led to a significant decline for healthcare stocks through June.

In sharp contrast, the Fund returned 22.4% net ¹ in the second half of the year reflecting strong operating performance from our holdings and a more supportive backdrop for the healthcare sector. M&A activity accelerated in July, highlighted by several notable acquisitions, including Merck’s $10 billion purchase of Verona Pharmaceuticals and Sanofi’s $9.5 billion acquisition of Blueprint Medicines. Private equity interest also remained robust, with Archimed announcing the $750 million acquisition of Zimvie during the month. Additionally, second quarter earnings reports were broadly better than expectations. By this point, uncertainty surrounding federal government proposals and regulatory actions had been largely absorbed by market participants, contributing to improved investor confidence.

We believe the outlook for investing in the healthcare sector remains positive entering 2026 given low starting valuations, expectations for continued M&A and the potential for solid operating performance. We focus on identifying businesses that are more insulated from macro and regulatory factors and are positioned to compound value through a range of environments.

Top contributors in 2025 included Liquidia (LQDA), Ligand Pharmaceuticals (LGND) and Zimvie. Top detractors included Vestis (VSTS) and Indivior (INDV). The Fund held thirteen long positions and one short position at year-end. Our top three positions represented almost 45% of the portfolio, reflecting the concentrated nature of our strategy. Our top five holdings were Electromed (ELMD), Consensus Cloud Solutions (CCSI), Liquidia, ADMA Biologics (ADMA), and Ligand Pharmaceuticals. Our top five positions have all been held for one year or longer (almost eight years in the case of Electromed). We added new positions in Journey Medical (DERM), Avanos Medical (AVNS) and National Research Corp. We sold our longstanding position in Spok Holdings (SPOK). The Fund lost money on the short side of the portfolio in 2025 but remains profitable since inception.

The Fund’s allocation to pharmaceutical and biotechnology stocks increased significantly during the year to over 40% by year end. We believe small-cap biotech and pharma stocks are on the front end of a multi-year innovation cycle. Recent drug launches from the likes of Liquidia, Crinetics Pharmaceuticals (CRNX), Kyrstal Bio, Ardelyx (ADRX) and Travere Therapeutics (TVTX) — among many others — have blockbuster revenue potential ($1 billion plus). In contrast, large-cap pharma companies are facing the largest patent expiry cycle in the industry’s history. According to a recent article in The American Bazaar titled “The $400 Billion Patent Cliff: Big Pharma’s Revenue Crisis,” the industry could lose up to $400 billion of revenue by 2030. Mega blockbuster drugs such as Merck’s (MRK) Keytruda, Bristol Myers Squibb’s (BMY) Eliquis, JNJ’s (JNJ) Darzalex, Novo Nordisk’s (NVO) Ozempic and Novartis’ (NVS) Entresto could all lose key patent protections by the end of decade. Big pharma companies have strong balance sheets and generate substantial amounts of cash. In 2024, the top ten pharma companies globally generated over $120 billion of free cash flow. We believe acquisitions will play a key role in filling the void created by patent expirations, and small to mid-cap biotech and pharma companies are well-positioned to benefit as potential acquisition targets.

The Fund received $454,366 in dividend income during 2025. OTC Markets, our only non-healthcare holding, paid a special dividend of $1.75 in December. The Fund’s dividend yield stands at 0.5%, reflecting our focus on long-term capital growth rather than income generation.

Largest Contributors

Liquidia (LQDA) – $3.6 billion market cap

We began accumulating a position in Liquidia last January during the JP Morgan Healthcare Conference. The company presented an initial cohort from the open label ASCENT trial of Yutrepia in patients with pulmonary hypertension – interstitial lung disease (PH-ILD), and the data looked exceptionally strong. At $1 billion, the company’s market cap was overly discounted following years of litigation with its key competitor, United Therapeutics. Our physician research indicated patient dis-satisfaction with current therapies and a high unmet medical need in both pulmonary arterial hypertension (PAH) and PH-ILD patients (both indications are in the Yutrepia label). At the time of our initial purchases, the company’s lead asset, Yutrepia, had already received conditional approval by the FDA but awaited a key litigation outcome. That outcome came on May 2 allowing the FDA to give a final approval for the drug on May 23. Liquidia launched Yutrepia on June 2, and the initial launch phase has been nothing short of stunning with sales reaching $90 million in the fourth quarter. Yutrepia is poised to become a blockbuster in the quarters ahead due to its unique and differentiated profile, which includes easier titration and lower cough. Perhaps most remarkable, the company achieved positive cash flow of $30 million in the second full quarter post launch highlighting its efficient go-to-market model. Additional litigation remains outstanding with United, but we believe it will be concluded favorably for Liquidia in the coming months. If we are correct, the share price could have significant appreciation potential from here and the company could become an acquisition target. We are modeling earnings per share of $3.50 in 2026, which puts the current PE multiple at 12x.

Ligand Pharmaceuticals (LGND) – $3.9 billion market cap

We have owned Ligand for several years. As a royalty aggregator, Ligand has a capital light business model featuring attractive margins and high returns on capital. The company has a skilled management team that has a history of sourcing royalty rights on underappreciated drugs and medical devices with favorable risk-adjusted return profiles. The key to our thesis on Ligand has been the launches of Merck’s (MRK) Ohtuvaryre for COPD and Travere’s Filspari for kidney disease. Both drugs have blockbuster sales potential and long patent lives. In addition, we expect Palvella’s (PVLA) QTORIN for MLM to be approved in 2027. QTORIN could also hold blockbuster potential with Ligand receiving a high single digit royalty on sales. We believe Ligand has a multi-year runway for better-than-expected sales and earnings growth as a result of these launches. Ligand’s balance sheet remains strong with $1 billion of cash to deploy into future royalty deals.

Zimvie (ZIMV) – $730 million market cap

Zimvie was our largest detractor to performance in 2023-24. Our patience paid off in 2025 as the company was acquired by Archimed in July for a 124% premium. We sold our position with a marginal gain in September following the announcement.

Largest Detractors

Vestis (VSTS) – $890 million market cap

Vestis was spun off from Aramark in 2023 becoming a pure play workplace uniform rental business with exposure to healthcare. We were attracted to the stock given its low valuation and inferior margin profile relative to its two large publicly traded peers, Cintas and UniFirst. It was our belief that management could improve margins as a standalone company for many years to come. However, we underappreciated the amount of investment that was required to unlock higher margins. In addition, management turnover and balance sheet weakness created uncertainty, which contributed to a declining share price. We sold our position in May following a weaker-than-expected business outlook for 2025.

Indivior (INDV) – $4.2 billion market cap

We purchased shares of Indivior in October of 2024 at 4x EV/EBITDA and 1x EV/Sales – very cheap multiples for a high margin pharmaceutical company. The company had a valuable asset in Sublocade, a long-acting injectable therapy to treat substance abuse. Indivior had endured years of mismanagement and disappointment, which led up to the stock trading at an incredibly low valuation. In January, the company provided a worse-than-expected business outlook for 2025, which appeared to be the continuation of a long trend of missed expectations. We sold the stock as a result. As it turned out, our sale of Indivior represented our biggest mistake in 2025. The management team was replaced in February shortly after our sale. The company announced a new strategy that included cost cuts and a simplification of the business model. Following these positive changes, the stock increased by over 300%. We typically screen for new management changes like the one that occurred at Indivior, but we missed the opportunity to add it back to the portfolio.

Partnership Update

The firm achieved several meaningful milestones in 2025:

• The Summers Value Fund LP reached a record amount of assets under management (AUM) of $40 million at year end. We launched the Fund with AUM of $2.6 million in 2018. We continue to believe our strategy has capacity for $500 million of AUM without compromising our opportunity set.
• In January, we launched SVP Deal Fund III LP to increase our ownership stake in restor3d (private) through a convertible note offering. The convertible note was subsequently converted into a preferred equity security in July when private equity firm Partners Group led the Series B round. In total, we have invested almost $24 million in restor3d, which is targeting an IPO in late 2026 or early 2027.
• We closed SVP Deal Fund 1 LP after returning $6 million of investor capital during the year. The Fund generated a return of 108% net of fees for an unlevered IRR of 21% net of fees over its life. We are proud of the return we were able to generate for our investors from this activist strategy, and we see the potential for additional activist opportunities in the future.

Our goal, as always, is to treat our investors the way we would want to be treated if we were on their side of the table. As in year’s past, direct Fund expenses including fund administration, audit, tax and legal were covered through the operating budget. We have never charged a penny to the Fund beyond the stated management fee and incentive fee, when earned.

The Fund narrowly surpassed its 6% cumulative annual hurdle rate in 2025, which triggered a small incentive fee to the general partner.

As a reminder, the Summers Value Fund LP is — by far — my family’s largest asset. I believe alignment between myself and our investors is a crucial driver of our long-term success.

In Closing

Thank you to our partners for your continued trust and support. Our stable and growing capital base is an important advantage in our goal to generate double-digit annual returns over the long run. We are grateful for those who added to their accounts during the year.

Our strategy continues to have ample capacity, and we welcome new investors who appreciate our unique approach. If you know someone who may be interested in learning more, please reach out to Alison Tomlinson at atomlinson@summersvalue.com.

Sincerely,

Andrew Summers, CFA, Managing Partner

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.